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Insights That Matter

Equity Market Insights – Melting Up Despite Concerns

https://gf-cap.com

 

“Is the market high only because of some irrational exuberance— wishful thinking on the part of investors that blinds us to the truth of our situation?” 
― Robert J. Shiller

►Everybody seems concerned about slowing global growth but equity markets have staged a remarkable recovery after a dismal Q4 – last week was exceptional with small caps leading the way

►US Large cap, blue chips have outperformed in the last month

►Small caps, not surprisingly, have been a lot more jumpy but YTD are slightly ahead US large caps

►Over the last 12 months, US equities are up while international still show losses

►Valuations are still a bit stretched in the US but growth and profitability are hanging in

►The key for equity markets is global growth and whether we are entering a slowdown or not

Countries & Region:

►Despite concerns about global economic growth, all major equity markets with the exception of Australia had strong positive returns last week

►Commodity indices were up big last week as oil prices continued firming up due to supply cuts

►In the US Value did very well beating Growth by close to 1%

►In international markets Value out-performed Growth by a smaller margin driven primarily by sector differences

►Globally, Discretionary, Financials and Materials out-performed last week while lower beta sectors such as Staples and Utilities lagged behind


Style & Sector:

►In the US, we saw Small Caps do better than large caps

►The size effect in the US was really strong last week in favor of small caps

►Within equity styles, Quality strategies out-performed

►The Momentum factor has lost “mo” – momentum stocks have underperformed the general market this year

►International equities last week took a hit as the USD remained strong losses

►On a YTD basis developed  Europe has outperformed other international strategies


This Coming Week:

►The strength of the equity market recovery has been impressive especially among small caps but last week was exceptional

►We believe that a risk on/off market is likely this year

►Equity Technicals have improves significantly this year and we no longer believe that we are in a nascent Bear Market

►Brexit is up for yet another delay but prospects of passing Parliament are slim. Could we be starring at Referendum 2.0?

►Tariff wars are taking a bite with the IMF recently citing trade wars as the main reason for a cut in their forecast of global growth

►Our models still favor a reduction in risk in our portfolios with positive active allocations to cash and bonds

►The price of higher equity returns is discomfort – volatility has been too low in the last few years

►We believe that the US yield curve will become positive again as people realize that growth while slowing down is still ok

 

To read our weekly report including style factor breakdowns please click  here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

 

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – Investors Benefit From Riskier Asset Classes


Risk taking is in, but is risk underpriced again?

►The seesaw continues with risk assets doing particularly well this past week

►US large caps performed best – up 2.9% for the week, but International Developed equities were only slightly

►Bond strategies delivered positive returns last week as well but significantly below those of more risky asset classes

►On a YTD basis, US small caps lead the pack by a slight margin – up 15.5%

►In the context of balanced 60/40 strategies US strategies and international strategies performed in line with each other (both up 1.9%)

►Aggressive focused multi-asset class strategies out-performed less risky options

►Within equities, Growth has slightly out-performed Value in 2019 and over the last year Growth also remains solidly ahead

►Thus far in 2019 more aggressive multi-asset strategies have outperformed less risky portfolios

Currencies:

►A rare down week for the USD as expectations for growth in the US slow down and the Fed remains on hold

►For 2019 we still expect the USD to depreciate slightly

►A depreciating USD will boost international asset returns – we expect this effect to persist in 2019

►A big question mark for this coming week is what happens to Brexit (yet again) – sterling is being massively tossed around depending on political prospects

►Interestingly, the pound has held up admirably during this period of uncertainty and is now in a Break Out phase

►The Yen is now in a Break Down phase as investors have regained their desire for risk

►In general, FX volatility has increased substantially in the last couple of months

Commodities:

►After a bad prior week, ag commodities rebounded strongly with wheat, the most beaten down of the group, up over 6%

►The tension in the grain complex is mostly supply driven but soybeans also are being affected by trade negotiations with China

►Commodity indices have moved into an Improving phase as oil markets have found some stability

►Gas was down slightly last week and remains in a Down Trend magnified by weak seasonality

►Copper kept its gains from the previous week as global growth only slows down slightly

►Gold and Silver were flat last week and are showing divergent patterns – gold being stronger than silver

►While inflationary expectations remain low, commodity prices are an excellent hedge should things change

This Coming Week:

►While risky assets have recovered we still think that risk is being shunned at the moment – investors seem uncomfortable making bold bets

►While not comfortable, US investors should consider allocating more money to non-US stocks due to their lower valuations and potentially a depreciating USD

►The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes

►The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted

►We are also watching out for any jump in inflationary expectations (which have been trending down)

►Tariffs are inflationary and will be reflected in higher consumer prices eventually

►Our biggest concerns revolve around a slowing global economy – The IMF recently lowered 2019 growth numbers to 3.5%

►We still see a risk on/off market this year making it difficult for short-term investors – probably best to extend horizons

__________________________________________________________________________________

To read our full weekly report please click here

 

ic J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

 

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Equity Market Highlights – Cold Showers Never Feel Good in March

https://gf-cap.com

“Is the market high only because of some irrational exuberance— wishful thinking on the part of investors that blinds us to the truth of our situation?” 
― Robert J. Shiller

►Equity markets have staged a remarkable recovery after a dismal Q4 but last week was a wake-up call

►Over the last month, US small and large caps have performed in line with each other but ahead of international equity strategies

►Over the last 12 months, US large cap equities are up slightly while US small cap and international still show losses

►Valuations are still a bit stretched in the US but growth and profitability are hanging in

►The key for equity markets is global growth and whether we are entering a slowdown or not

Countries & Region:

►A global recovery for equities was interrupted last week as growth concerns returned to the forefront

►Commodity indices were flat last week as oil prices firmed but agricultural markets headed south due to excess supply conditions

►In the US Value slightly under-performed  Growth last week, but the main style effect was size (the smaller the worse)

►In international markets Value under-performed Growth by a wider margin driven primarily by sector differences

►Globally, Energy, Financials and Health Care under-performed last week while interest-sensitive sectors such as Telecom and Utilities held their own


Style & Sector:

►In the US, we saw Small Caps do worse than large caps

►The size effect in the US was really strong last week

►Within equity styles, Quality, Yield, and Low Vol strategies delivered lower losses (lower beta)

►The Momentum has lost “mo” – momentum stocks have underperformed the general market this year

►International equities last week took a hard hit both in local currency as well as through currency losses

►On a YTD basis developed Europe has outperformed other international strategies


This Coming Week:

►The strength of the equity market recovery has been impressive especially among small caps

►We believe that a risk on/off market is likely this year

►Given the low levels of investor risk aversion we would expect a reversal in the near future

►Equity Technicals have deteriorated to the point that 35% of stocks remain in the Down Trend Phase

►Political drama in Washington is exacerbating the uncertainty of market participants but investors seem to be in denial thus far in 2019

►Brexit is up for the spring but prospects of passing Parliament are slim. Could we be starring at Referendum 2.0?

►Tariff wars are taking a bite with the IMF recently citing trade wars as the main reason for a cut in their forecast of global growth

►Our models still favor a reduction in risk in our portfolios with positive active allocations to cash and bonds

►The price of higher equity returns is discomfort – volatility has been too low in the last few years

►While Value is holding its own with Growth we still see the action at the sector level rather than in terms of pure valuation

To read our weekly report including style factor breakdowns please click  here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – Investors Forget About Risk


Risk Loving is in but for how long?

►The comeback for holders of risky assets was interrupted this week as growth concerns returned

►EM, Commodities and Reits had poor weeks as commodity prices suffered again and interest rates increased in the US

►On a YTD basis US small caps lead the pack by a wide margin – up 18.1%

►In the context of balanced 60/40 strategies US strategies out-performed strategies more globally focused

►Aggressive focused multi-asset class strategies out-performed less risky options

►Within equities, Growth has slightly out-performed Value in 2019 and over the last year Growth also remains solidly ahead

►Thus far in 2019 more aggressive multi-asset strategies have outperformed

Currencies:

►Flat week fort the USD

►For 2019 we still expect the USD to depreciate slightly

►A depreciating USD will boost international asset returns – we expect this effect to persist in 2019

►A big question mark for this coming week is what happens to Brexit (yet again) – sterling is being massively tossed around depending on political prospects

►The Yen is now in a Break Down phase as investors have regained their desire for risk

►In general, FX volatility has increased substantially in the last couple of months

Commodities:

►Commodity indices have moved into an Improving phase as oil markets have found some stability

►Gas was up big last as it became less oversold

►Copper moved down slightly after a big spike up the previous week – still very growth oriented

►Gold and Silver were slightly down last week and are showing divergent patterns

►While inflationary expectations remain low, commodity prices are an excellent hedge should things change

This Coming Week:

►While risky assets have recovered we still think that risk is being shunned at the moment – investors seem uncomfortable making bod bets

►While not comfortable, US investors should allocate more money to non-US stocks due to their lower valuations and a depreciating USD

►The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes

►The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted

►We are also watching out for any jump in inflationary expectations (which have been trending down)

►Tariffs are inflationary and will be reflected in higher consumer prices eventually

►Our biggest concerns revolve around a slowing global economy – The IMF recently lowered 2019 growth numbers to 3.5%

►We still see a risk on/off market this year making it difficult for short-term investors – probably best to extend horizons

__________________________________________________________________________________

To read our full weekly report please click here

ic J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Equity Market Insights – Amazing Recovery But For How Long?

https://gf-cap.com

“Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes”

– Jack Bogle

►Equity markets have staged a remarkable recovery after a dismal Q4

►Over the last month, US small and large caps have performed the best

►Over the last 12 months, US equities are up slightly while International still show large losses

►Valuations are still stretched in the US but growth and profitability are hanging in

►The key for equity markets is global growth and whether we are entering a slowdown or not

Countries & Region:

►A global recovery for most but with large differences in global market performance

►Commodity indices continue their recovery as oil prices firmed up helping resource oriented markets

►In the US Value slightly outperformed  Growth last week, but the main style effect was size (the smaller the better)

►In international markets Value under-performed Growth by a wide margin driven primarily by sector differences

►Globally, Energy and Industrials performed best last week while interest-sensitive sectors such as Telecom and Utilities under-performed


Style & Sector:

►In the US, we saw Small Caps do best

►The size effect in the US was really strong last week

►Within equity styles, Quality strategies continue shinning

►The Momentum has lost all “mo” – momentum stocks have underperformed the general market

►Developed Europe rebounded strongly last week despite growth concerns

►Latam has vastly outperformed EM Asia – YTD it is up nearly double the EM index


This Coming Week:

►It’s been a huge surprise how strong equity markets have been this year especially in the US

►Equity Technicals have improved to the point that only 13% of stocks remain in the Down Trend Phase

►The strength of the stock price recovery has been so extreme that a quick reversal would not be out of the question

►Political drama in Washington is exacerbating the uncertainty of market participants but investors seem to be in denial thus far in 2019

►Brexit is up for the spring but prospects of passing Parliament are slim. Could we be starring at Referendum 2.0?

►Tariff wars are taking a bite with the IMF recently citing trade wars as the main reason for a cut in their forecast of global growth

►Our models still favor a reduction in risk in our portfolios with positive active allocations to cash and bonds

►The price of higher equity returns is discomfort – volatility has been too low in the last few years

►This coming week has huge earnings implications. Lots of companies reporting Q4.

►While Value is holding its own with Growth we still see the action at the sector level rather than in terms of pure valuation

To read our weekly report including style factor breakdowns please click  here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – Lower Growth Hits Equities


Taking a Breather Due to Lower Potential Growth

►The comeback for holders of risky assets was interrupted this week as growth concerns took over the agenda

►US assets managed to eke out gains with REITS especially having a good week

►EM and International equities had down weeks both in local currency as well as in USD terms

►On a YTD basis US Small Cap and REITS are in the lead – up 11.8%

►Commodity indices had a poor week as energy prices suffered large losses this past week

►In the context of balanced 60/40 strategies US strategies out-performed strategies more globally focused

►Aggressive, domestically focused multi-asset class strategies under-performed less risky options

►Within equities, Growth has slightly under-performed Value in 2019 but over the last year Growth remains solidly ahead

►Thus far in 2019 more aggressive multi-asset strategies have outperformed

Currencies:

►The USD had a strong week, up over 1%, despite ongoing budget discussions in Washington and a pause by the Fed in raising rates

►For 2019 we still expect the USD to depreciate slightly

►A depreciating USD will boost international asset returns – we expect this effect to persist in 2019

►A big question mark for this coming week is what happens to Brexit (yet again) – sterling is being massively tossed around depending on political prospects

►The Yen is now in an Up Trend phase as investors remain risk averse and the Yen is usually considered the “safe” trade

►RResource-oriented currencies experienced losses last week relative to the USD  as oil and gas prices trended down

►In general, FX volatility has increased substantially in the last couple of months

Commodities:

►Commodity indices continue in a Down Trend even as oil markets have found some stability

►Oil and gas were down big last week due to warmer weather in the US and oversupply conditions

►Soybean prices should be firming up as a trade deal with China gets some traction

►Gold and Silver while slightly down last week are becoming a hedge for nervous equity investors

►However, we still view US Treasuries as the best hedging option for equity risk

This Coming Week:

►While risky assets have recovered we still think that risk is being shunned at the moment

►While not comfortable, US investors should allocate more money to non-US stocks due to their lower valuations and a depreciating USD

►The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes

►The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted

►We are also watching out for any jump in inflationary expectations (which have been trending down)

►Tariffs are inflationary and will be reflected in higher consumer prices eventually

►Our biggest concerns revolve around a slowing global economy – The IMF recently lowered 2019 growth numbers to 3.5%

►We still see a risk on/off market this year making it difficult for short-term investors – probably best to extend horizons

►In general, investors seem very pessimistic making contrarian plays interesting from a tactical perspective

Earnings season in the US is in full swing

__________________________________________________________________________________

To read our full weekly report please click here

ic J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Equity Market Insights – The Beat Goes On For Equity Investors

https://gf-cap.com

“Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes”

– Jack Bogle

►Equity markets have staged a remarkable recovery after a dismal Q4

►Over the last month, US small caps and EM stocks have performed the best

►Over the last 12 months all major equity asset classes are down with US Large Cap the least and EM the most

►Valuations while more reasonable than 3 months ago are not yet favorable – we may be seeing a reversal from the q4 downdraft, not a fundamental uptrend

►The key for equity markets is global growth and whether we are entering a slowdown or not

Countries & Region:

►A global recovery for most but with large differences in global market performance

►Commodity indices continue their recovery as oil prices firmed up helping resource oriented markets

►In the US Value and Growth performed in line last week, but higher dividend yield stocks really rocked it

►In international markets Value under-performed Growth by a wide margin driven primarily by sector differences

►Globally, Staples and Energy performed best last week while Financials gave back some of the gains from the previous week


Style & Sector:

►In the US, we saw Large Caps  do best

►The size effect in the US was strong (in reverse of expectations)

►Within equity styles, Dividend Yield and Quality strategies resulted in better performance

►The Momentum trade has made a bit of a comeback in 2019 – it’s up 7% YTD

►Latam shot up last week – the index is up 14.7% for the year


This Coming Week:

►Risk Aversion should spring up this week with more earnings in the US

►Equity Technicals have improved to the point that only 13% of stocks remain in the Down Trend Phase

►Political drama in Washington is exacerbating the uncertainty of market participants but investors seem to be in denial thus far in 2019

►Brexit is up for the spring but prospects of passing Parliament are slim. Could we be starring at Referendum 2.0?

►Tariff wars are taking a bite with the IMF recently citing trade wars as the main reason for a cut in their forecast of global growth

►Small caps are the best performing major asset class in 2019 after a dismal 2018 – some of it is due to a snap back but we are still underweight small caps

►Surprisingly EM equities have outperformed developed markets in the last month. 

►Our models still favor a reduction in risk in our portfolios with positive active allocations to cash and bonds

►The price of higher equity returns is discomfort – volatility has been too low in the last few years

►This coming week has huge earnings implications. Lots of companies reporting Q4.

To read our weekly report including style factor breakdowns please click  here

Eric J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

Asset Allocation Insights – Risky Assets Continue Their Ciomeback


Partying Like it is 2017 Again

►The comeback for holders of risky assets such as equities, real estate, and commodities continues

►EM equities perform the best of our major asset classes – up 2.3% for the week and over 9% over the last 3 months

►Developed international equities also had a huge week – up 1.7% and 5% for 2019 thus far

►Commodity indices also made a nice comeback boosted by higher oil prices – up 9.4% for the year already

►Aggressive, domestically focused multi-asset class strategies out-performed less risky options

►In 2018 lower risk asset allocation strategies   outperformed especially if allocations involved international equities but the story is reversed thus far this year

►Within equities, Growth has slightly under-performed Value in 2019 but over the last year Growth remains solidly ahead

►Over the last year, only Cash and US Reits exhibit positive returns

Currencies:

►The USD is losing some strength as budget discussions in Washington remain unresolved and the Fed has indicated being close to done with rate hikes

►A depreciating USD will boost international asset returns – we expect this effect to persist in 2019

►A big question mark for this coming week is what happens to Brexit (yet again) but sterling is showing strength

►The Yen is now in a Break Out phase as investors remain risk averse and the Yen is usually considered the “safe” trade

►Resource-oriented currencies experienced losses last week relative to the USD despite firmer commodity prices

In general, FX volatility has increased substantially in the last couple of months

Commodities:

►Commodity indices continue in a Down Trend even as oil markets showed continued gains last week

►Grain prices have also continued their upward path from the lows of last summer

►Gold and Silver are in the Break Out phase as investors have flocked to them as a hedge against equity volatility

►However, we still view US Treasuries as the best hedging option for equity risk

This Coming Week:

►While risky assets recovered last week we still think that risk is being shunned at the moment

►While not comfortable, US investors should allocate more money to non-US stocks due to their lower valuations and a depreciating USD

►The strong USD will not persist much stronger as the FED appears close to the end in terms of interest rate hikes

►The Value/Growth discussion is being overshadowed by sector rotation but on a risk-adjusted basis we believe that higher allocations to Value are warranted

►We are also watching out for any jump in inflationary expectations (which have been trending down)

►Tariffs are inflationary and will be reflected in higher consumer prices eventually

►Our biggest concerns revolve around a slowing global economy – The IMF recently lowered 2019 growth numbers to 3.5%

►We still see a risk on/off market this year making it difficult for short-term investors – probably best to extend horizons

►In general, investors seem very pessimistic making contrarian plays interesting from a tactical perspective

__________________________________________________________________________________

To read our full weekly report please click here

ic J. Weigel

Global Focus Capital LLC

eweigel@gf-cap.com

______________________________________________________________________________

Global Focus Capital
Global Focus Capital

Publications:

Weekly Asset Allocation Review – Free

Weekly Equity Themes Review – Free

The Equity Observer (Monthly) – Subscription Required

The Asset Allocation Advisor (Monthly) – Subscription Required

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